Deputy Commissioner of Income-tax, V. M/s. Sargam Retails Pvt. Ltd., Pune

ITA 1479/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6939 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-11-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1479 /P U N/20 1 5 / ASSESSMENT YEAR: 20 11 - 12 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 6 , PUNE . / APPELLANT VS. M/S. SARGAM RETAILS PVT. LTD., 4/1, GANESH PETH, BURUD LANE, PUNE 4110 04 . / RESPONDENT PAN: AAKCS7336N / APPELLANT BY : SHRI ACHAL SHARMA , ADDL. CIT / RESPOND ENT BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 02 . 1 1 .201 7 / DATE OF PRONOUNCEMENT: 20 . 1 2 .201 7 / ORDER PER SUSHMA CHOWLA, JM: T H E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT( A ) - 11, PUNE , DATED 1 7.08.2015 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 2 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WHETHER ON THE FACT AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN ALLOWING DEDUCTION U/S 80LA UNDERTAKING WISE AND NOT ON A CONSOLIDATED BASIS. 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE ID. CIT(A) MAY BE VACATED AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 3 . THE ISSUE RAISED IN THE PRESET APPE AL FILED BY THE REVENUE IS AGAINST THE ALLOWANCE OF DEDUCTION UNDER SECTION 80IA OF THE ACT UNDERTAKING WISE AND NOT ON A CONSOLIDATED BASIS. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.19,69,17,066/ - . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA(4)(IV)(A) OF THE ACT AT RS.2,42,34,693/ - TOWARDS PROFIT EARNED FROM WIND POWER GENERATION FROM ITS WINDMILLS. THE AS SESSEE HAD CLAIMED THE AFORESAID DEDUCTION UNDERTAKING WISE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM UNDERTAKING WISE AND NOT BUSINESS WISE. THE ASSESSEE POINTED OUT THAT IT HAD INSTALLED WINDMILLS IN DIFFERENT YEARS AND WAS ELIGIBL E TO CLAIM THE DEDUCTION FOR PERIOD OF 10 YEARS OUT OF TOTAL PERIOD OF 15 YEARS. THE OPTION WAS WITH THE ASSESSEE TO S O CLAIM DEDUCTION FOR THE PERIOD 10 YEARS SINCE EACH UNIT WAS A SEPARATE UNDERTAKING. THE ASSESSEE EMPHASIZED BEFORE THE ASSESSING OFFIC ER THAT THOUGH ALL THE UNITS WERE GENERATING ELECTRICITY BUT WERE SEPARATE UNDERTAKING S AND COULD NOT BE CONSIDERED AS ONE UNIT. THE ASSESSING OFFICER WAS OF THE VIEW THAT FROM THE LANGUAGE OF SECTION, THE TERM ELIGIBLE ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 3 BUSINESS MEANS THE BUSINESS OF PO WER GENERATION FROM THE WINDMILLS. THUS, THE ASSESSEES CONTENTION THAT 100% DEDUCTION WAS IN RESPECT OF PROFITS DERIVED FROM A PARTICULAR UNIT AND NOT FROM THE CONSOLIDATED UNITS WAS FOUND TO BE NOT CORRECT BY THE ASSESSING OFFICER. THE ASSESSING OFFICE R FURTHER OBSERVED THAT THE THERE WAS NO MANDATE UNDER SECTION 80IA OF THE ACT TO TREAT EACH WINDMILL PROJECT AS SEPARATE UNDERTAKING OF THE ASSESSEE AND HENCE, THE CLAIM OF ASSESSEE WAS HELD TO BE NOT CORRECT. IN TURN, RELYING ON THE SIMILAR ISSUE IN THE PREVIOUS YEAR THE ASSESSING OFFICER CURTAILED THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT TO RS.1,69,30,553/ - . 5. THE COMMISSIONER OF INCOME TAX (APPEALS) RELYING ON THE RATIO LAID DOWN IN ASSESSEES OWN CASE AND THE DECISION OF PUNE BENCH OF THE TR IBUNAL IN THE CASE OF M/S. J - SONS FOUNDRY PVT. LTD., SANGLI, ORDER DATED 30.01.2013 HELD THAT THE DEDUCTION UNDER SECTION 80IA(4) IS TO BE ALLOWED UNDERTAKING WISE AND NOT ON CONSOLIDATED BASIS. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LD. DR FOR THE REVENUE POINTED THAT THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER REPORTED IN (2008) 299 ITR 444 (SC) HAS HELD THAT THE GROSS TOTAL INCOME IS TO BE ARRIVED AT AFTER ADJUSTING LOSSES OF OTHER DIVISION AGAINS T PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. ACCORDINGLY, IT W AS PROPOSED BY THE LD. DR FOR THE REVENUE THAT THE ORDER OF ASSESSING OFFICER NEEDS TO BE UPHELD. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN SINTEX INDUSTRIES LTD. VS. ASSISTNA T COMMISSIONER OF INCOME TAX (OSD) [2013] 37 TAXMANN.COM 217 (GUJARAT). ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 4 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF PUNE BENCH OF THE TRIBUNAL WHERE IN IT HAS BEEN HELD THAT EACH WINDMILL WAS SEPARATE AND WAS TO BE ALLOWED THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT SEPARATELY. RELIANCE WAS PLACED ON THE CASE OF SISTER CONCERN IN ITA NO. 1151/PUN/2013 IN M/S. D.J. MALPANI VS. ACIT, WITH LEAD ORDER IN ITA NOS. 1148 TO 1154/PUN/2013 RELATING TO ASSESSMENT YEARS 2004 - 05 TO 2010 - 11, ORDER DATED 30.10.2015. THE LD. AR FOR THE ASSESSEE FURTHER POINTED THAT THE ASSESSEE WAS ENGAGED IN TWO SEPARATE BUSINESS I.E. MANUFACTURE OF Z ARDA AND ALSO RUNNING THE W INDMILL. THE RETURN OF INCOME FOR THE YEAR WAS RS.19.69 CRORES, AFTER CLAIMING THE DEDUCTION UNDER SECTION 80IA(4) AT RS.2.42 CRORES. OUR ATTENTION WAS DRAWN TO THE ASSESSMENT ORDER PLACED AT PAGE 3 TO POINT OUT THAT THE WINDMILLS WERE ADMITTEDLY INSTALL ED IN DIFFERENT PHASES. HE POINTED OUT THAT ONCE, THE ASSESSEE STARTS CLAIMING THE DEDUCTION IN RESPECT OF FIRST WINDMILL INSTALLED FOR WHICH IT IS ENTITLED TO CLAIM THE DEDUCTION FOR A PERIOD OF 10 YEARS , OUT OF TOTAL PERIOD OF 15 YEARS , THEN IN RESPECT OF BALANCE WINDMILL /S WHICH WERE ESTABLISHED MUCH LATER , PERIOD OF 10 YEARS WOULD GET CURTAILED. HE FURTHER POINT ED OUT THAT IN THE CASE OF ASSESSEE, IN ANY CASE THE LOSSES OF WINDMILL WERE BEING SET OFF AGAINST OTHER INCOME I.E. THE BUSINESS INCOME AND T HE ASSESSEE HA D SHOWN GROSS TOTAL INCOME AT RS.20 CRORES. REFERRING TO THE RELIANCE PLACED UPON BY THE LD. DR FOR THE REVENUE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SINTEX INDUSTRIES LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (OSD ) (SUPRA) , THE LD. AR FOR THE ASSESSEE POINTED THAT IN THE SAID CASE , THE GROSS TOTAL INCOME WAS NIL AND HENCE THE CURTAILMENT IN DEDUCTION CLAIMED UNDER SECTION 80IA(4) OF THE ACT. HE FURTHER POINTED OUT THAT SECTION 80IA(2) OF THE ACT SUM OF THE AGGREG ATING INCOME BEING NIL , WHEREAS IN ASSESSEES CASE THE SAME WAS NOT THE SITUATION. ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 5 9 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN PRESENT APPEAL FILED BY THE REVENUE IS VIS - A VIS THE CLAIM OF DEDUCTION UNDER SE CTION 80IA(4)(IV)(A) OF THE ACT. THE ASSESSEE HAD INSTALLED WINDMILL IN DIFFERENT YEARS AND THE SAME WERE AS UNDER : SR. NO. NAME OF THE UNDERTAKING YEAR OF INSTALLATION 1 SATARA PHASE I F.Y. 2000 - 01 2 KUDEREKONDA KARNATAKA PHASE I F.Y. 2008 - 09 3 KUDER EKONDA KARNATAKA PHASE II F.Y. 2008 - 09 4 SAMANA GUJARAT PHASE I & II F.Y. 2009 - 10 1 0 . THE ASSESSEE CLAIMED THAT EACH OF THE WINDMILL WAS A SEPARATE UNDERTAKING FOR WHICH SEPARATE BOOKS OF ACCOUNT WERE BEING MAINTAINED. IN RESPECT OF EACH OF THE UNDERT AKING THE ASSESSEE CLAIMED THE DEDUCTION SEPARATELY AS PER FORM NO. 10CCB. THE ASSESSEE WAS CLAIMING DEDUCTION IN RESPECT OF THE WINDMILL AT SATARA PHASE I AS IT HAD SHOWN PROFITS AND THE DEDUCTION CLAIMED WAS AT RS.2.42 CRORES ; HOWEVER, FOR THE OTHER WIN DMILLS I.E. KUDEREKONDA KARNATAKA PHASE I, KUDEREKONDA KARNATAKA PHASE II AND SAMANA GUJARAT PHASE I & II , THE ASSESSEE POINTED THAT THE DEDUCTION UNDER SECTION 80IA(4) WAS CLAIMED FROM ASSESSMENT YEAR 2011 - 12. THE ASSESSEE WAS ALSO ENGAGED IN THE BUSINES S OF MANUFACTURE OF Z ARDA AND AFTER SETTING OFF OF LOSSES FROM KUDEREKONDA KARNATAKA PHASE I, KUDEREKONDA KARNATAKA PHASE II AND SAMANA GUJARAT PHASE I & II , THE ASSESSEE HAD DECLARED THE RETURN OF INCOME AT RS.19.69 CRORES. HOWEVER, AGAINST THE PROFITS F ROM THE WINDMILL AT SATARA PHASE I , THE ASSESSEE HA D CLAIMED THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT AT RS.2.42 CRORES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80I A (4) OF THE ACT AFT ER ADJUSTING THE LOSSES FROM WINDMILL AGAINST THE ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 6 PROFITS OF THE WINDMILL AT SATARA AND HENCE, CURTAILED THE DEDUCTION UNDER SECTION 80IA(4) TO RS.1.69 CRORES AS AGAINST RS.2.42 CRO R ES CLAIMED BY THE ASSESSEE. 11. THE ISSUE OF TREATING EACH WINDMILL TO BE A SEPARATE UNDERTAKING ON WHICH DEDUCTION UNDER SECTION 80IA(4) IS TO BE ALLOWED HAS BEEN DECIDED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. J - SONS FOUNDRY PVT. LTD., SANGLI, ORDER DATED 30.01.2013. THE RELEVANT PORTION OF THE ORDER OF TRIBUNA L IS REPRODUCED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AT PAGE 9 OF THE APPELLATE ORDER. THE SAID IS BEING REFERRED BUT NOT BEING REPRODUCED FOR THE SAKE OF CONVENIENCE. THE SAID PROPOSITION HAS BEEN APPLIED IN THE CASE OF M/S. D.J. MALPANI VS. ACIT (SUPRA) ORDER DATED 30 - 10 - 2015 BY THE TRIBUNAL IN HOLDING THAT EACH PHASE OF WINDMILL WAS TO BE CONSIDERED AS SEPARATE UNDERTAKING , ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE TRIBUNAL HELD THAT THE SAID DEDUCTION HAS TO BE COMPUTED INDE PENDENTLY FOR EACH PHASE AND NOT ON CONSOLIDATED BASIS. IT MAY BE POINTED HEREIN ITSELF THAT THE ASSESSEE HAD ACQUIRED THE SATARA PHASE I FROM MALPANI SALES CORPORATION WHICH WAS A PARTNERSHIP FIRM WHICH WAS CONVERTED INTO THE PRESENT ASSESSEE COMPANY BEF ORE US. 1 2 . NOW, COMING TO THE STAND OF THE LD. DR FOR THE REVENUE. THE FIRST RELIANCE WAS ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT WHEREIN IT WAS HELD THAT FOR COMPUTING THE DEDUCTION UNDER SECTION 80I(6) OF THE ACT, THE ASSESSING OFFICER H AS TO TREAT PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS ONLY SOURCE OF INCOME IN ORDER TO ARRIVE AT DEDUCTION CLAIMING UNDER CHAPTER VI - A . H OWEVER, NON ABSTANTE CLAUSE APPEARING IN SECTION 80I(6) OF THE ACT WAS APPLICABLE ONLY TO QUANTUM OF DEDUCTIO N. IT WAS FURTHER EXPLAINED THAT IN VIEW OF SECTION 80B(5) OF THE ACT, THE GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUSTING LOSSES OF OTHER DIVISION AGAINST PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 7 13. APPLYING THE SAID PRINCIPLE LAID DOWN BY THE APEX COURT, THE HONBLE GUJARAT HIGH COURT (SUPRA) WHILE DECIDING THE CASE OF AN ASSESSEE BEFORE IT I.E. M/S. SINTEX INDUSTRIES LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) CURTAILED THE DEDUCTION UNDER SECTION 80IA OF THE ACT ON ACCOUNT OF I NCOME DERIVED FROM CPP AND DEDUCTION UNDER SECTION 80IB OF THE ACT ON ACCOUNT OF BADDI UNIT, SINCE IT HAD INCURRED LOSSES IN THE DAMAN UNIT. IN THE FACTS OF THE SAID CASE AFTER ALLOCATION OF LOSSES OF DAMAN UNIT THE NET INCOME WAS NIL AND HENCE THE DEDUCT ION CLAIMED UNDER SECTION 80IA/80IB OF THE ACT WAS CURTAILED. 1 4 . NOW, COMING TO THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD SHOWN PROFITS FROM ITS WINDMILL AT SATARA AND HAD WORKED OUT THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT IN RESPECT OF SA ID WINDMILL AT RS.2.42 CRORES. THE ASSESSEE WAS ENTITLED TO CLAIM THE SAID DEDUCTION UNDERTAKING WISE. THE LOSSES SUFFERED FROM THE OTHER WINDMILL ESTABLISHED BY THE ASSESSEE IN KARNATAKA AND GUJARAT WERE NOT TO BE SET OFF AGAINST THE PROFIT OF SATARA WI NDMILL , ON THE PROPOSITION THAT EACH WINDMILL WAS A SEPARATE UNDERTAKING. SUCH VIEW WAS UPHELD BY THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. J - SONS FOUNDRY PVT. LTD. (SUPRA) AND IN THE CASE OF M/S. D.J. MALPANI VS. ACIT (SUPRA). 1 5 . NOW, COMING TO THE SECOND ASPECT OF THE ADJUSTMENT OF LOSSES OF OTHER WINDMILL, WHICH HAVE BEEN SET OFF AGAINST THE PROFITS OF ANOTHER BUSINESS CARRIED ON BY THE ASSESSEE I.E. MANUFACTURE OF Z ARDA. THE ASSESSEE POINTED OUT THAT AFTER ADJUSTING THE SAID LOSSES RETURN OF INCOME WAS OFFERED AT RS.19.69 CRORES. IN VIEW THEREOF , THE PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SINTEX INDUSTRIES LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (OSD) (SUPRA) IS AT VARIANCE WHERE THE INCOME AFTER ADJU STMENT OF LOSS ES WAS NIL AND HENCE, THE SAID PROPOSITION IS NOT TO BE APPLIED TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, ITA NO . 1479 / P U N /201 5 M/S. SARGAM RETAILS PVT. LTD. 8 WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT UNDERTAKING WISE AND THE LOSS HAVING BEEN ADJUSTED AGAINST BUSINESS INCOME, CANNOT CURTAIL THE DEDUCTION CLAIMED UNDER SECTION 80IA(4) OF THE ACT. ACCORDINGLY, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 1 6 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 20 TH DAY OF DECEMBER, 2017 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 20 TH DECEMBER, 2017 . RK / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - 11, PUNE ; 4. / THE C I T (CENTRAL), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE